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What is Centralized Cryptocurrency Exchange?

Date: July 4, 2018

Posted By : admin

Centralized cryptocurrency exchange is typically an online platform and most common way to trade cryptocurrencies. This includes trading (buying/selling) cryptocurrencies with fiat as well as trading cryptocurrencies with other cryptocurrencies. These cryptocurrencies can be viewed as an online marketplace for the entire cryptocurrency network.

So why it is called as Centralized Cryptocurrency Exchange?

In the cryptocurrency world centralized means to entrust somebody else to handle your money.

Previously, all institutions that managed finances were referred with the “centralized” word.

Centralized primarily means to have a trusted middleman (agent/software) to handle whatever asset may be in the trade. For instance, a customer entrusts their money over to the bank to hold for them and the bank is now completely responsible for the safety of the customer’s money. In this case, the bank is the central entity that is between the money and the customer.

A centralized exchange is a third party that matches up individuals and institutions looking to exchange with each other. The role of a centralized exchange is to reduce the friction involved in exchange by providing liquidity and convenience through an account that holds funds and positions.

Stock market exchanges and the most popular cryptocurrency exchanges, like Coinbase, Binance, and Kraken, are implemented as centralized exchanges.

In many cases, it so happens that centralized exchange proves to be a safer option than the person finding some vague way to manage it on their own. Banks have many securities and a team to watch over their customers’ money.

In the same way, centralized cryptocurrency exchanges are no different than banks. In a centralized currency exchange, a user can store their money on the exchange software itself. The currency is now governed by the exchange software company. The trust of the middleman makes it easy for a customer to recover a lost password or 2FA because that customer has given the exchange software company the full access to their account.

This also takes the stress off of the customer of being 100% in control of their money. There are many instances where the investors have lost hundreds of thousands of dollars because they lost the private keys to their hardware wallet. Had their money being in a centralized exchange, they wouldn’t have to worry about recovering the private keys, as it would be as easy as showing an identity proof for verification.

The main advantage of the centralized exchange software is its usability. Centralized exchanges have easy to understand interfaces, tabs, and buttons on their websites whereas many decentralized exchanges have confusing exchange dashboards that take some time getting accustomed to.

MLM Vibes is one such software development company that specializes in making centralized exchange platforms that will facilitate the exchange of cryptocurrency in a centralized manner.